(Reuters) - Puerto Rico’s financial oversight board told the bankrupt island’s governor on Monday to revise his proposed fiscal turnaround plan to add more detail on labor and other reforms, and to create room in the budget for a $1.3 billion emergency fund.
In a letter to Governor Ricardo Rossello, the federally appointed, seven-member panel set a Feb. 12 deadline for the new draft, which will chart Puerto Rico’s plan to regain economic stability.
The U.S. territory is struggling to recover from September’s Hurricane Maria - its worst storm in 90 years - while also navigating the biggest government bankruptcy in U.S. history, with $120 billion in combined bond and pension debt.
Rossello’s draft turnaround plan, submitted on Jan. 24, projected a $3.4 billion budget gap that would bar the island from repaying a penny of its debt until 2022.
While the plan included subsidy cuts to cities and towns and the streamlining of public agencies, the board, which must approve the plan, demanded more details in Monday’s eight-page letter.
The board wants an emergency reserve of $650 million in the next five years and $1.3 billion within 10 years, “based on best practices for states and territories regularly impacted by storms,” it said.
It also wants more details on key structural reforms, notably labor. The board suggested that Rossello make Puerto Rico an at-will employer and make severance and Christmas bonuses optional, both of which are norms among U.S. states.
The board criticized Rossello’s proposed reduction of capital expenditures to $400 million a year, saying there had “been no project or agency-specific analysis” to support that figure and that the plan should provide for expenditures “necessary to maintain assets of the commonwealth.”
The board also sought more detail on Rossello’s vision for Puerto Rico’s energy grid, which was decimated by Maria.
Rossello has announced plans to privatize Puerto Rico’s bankrupt, quasi-public power utility, PREPA.
But the governor’s plan must “support a transaction by providing a set of targets for a potential bidder to meet or exceed during the bidding process,” the board said.
It said the plan should provide a five-year outlook for financial stability at the utility, and for the creation of an independent energy regulator with commissioners appointed by the governor, from a candidate list developed by an independent expert panel.
Reporting by Nick Brown; editing by G Crosse and Leslie Adler